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Venezuelan Economy highly vulnerable to falling oil prices

Venezuelan Economy highly vulnerable to falling oil prices

Posted by Dubraswka Aguilar on November 11, 2014

Although the government claims that Venezuela is ready to assume the fall in crude oil prices, experts say that of all the members of OPEC is one that should most worry. "Venezuela is the most vulnerable, one of the most committed and less willing to make the changes required by the economy," said economist and professor at the Central University of Venezuela, Humberto Garcia Larralde.

This was not always so. According to data collected by the economist Luis Oliveros, in 1998 Venezuela was the third country with the largest foreign reserves in OPEC, they represented 15% of the group total. Currently the situation is reversed and September 2014 was among Venezuela's reserves and the lowest were those who had the lowest increase in the last 16 years. Today it represents only 1% of the total funds of the organization.

Garcia Larralde said that Venezuela's reserves are at their lowest level. Until last Thursday accumulated 19.74 billion, according to the Central Bank of Venezuela. Of this amount only $ 2 billion are liquid. He also stressed that the gold price is also declining, which detracts from the funds in foreign exchange.

Given the situation emerges the importance of the Investment Fund for Macroeconomic Stabilization, which currently has only 3 million. "It had to preserve this fund, subject to the allocation rules at the time of plenty for the rainy day we had that income," he said. He indicated that this mechanism is to allow other countries cope with the low price scenario.

Concern isolated. Oliveros said that OPEC countries, except Venezuela, had taken advantage of the high prices that marked the oil market in recent years to form large funds and strengthen their international reserves. Garcia Larralde highlighted the case of Kuwait that already gets more resources for the performance of their investment funds for its oil revenues.

Among the more fragile is Iran, which must comply with strong commitments and penalties. "Iran needs higher prices but have compensation funds. That doesn`t mean it is not creating problems for them, but they have been preparing, "Oliveros said.

Both experts agree that another big hit is Russia, which already has fiscal problems, devalued the ruble and faces an enormous capital flight.

Venezuela, however, has one of the worst scenarios and are not prepared for it. "The Fonden does not function as clearing and nobody knows how much is there. In addition, the government has had a wasteful attitude in recent years. Outflows have passed 15% of GDP and the central bank continues to finance PDVSA "he said.

Plea for calm. The secretary general of OPEC, Abdullah bin al Badri, yesterday asked not to panic in the oil markets by the current downward trend of oil prices, the agency Efe reported: "No need to panic because the situation will improve spontaneously," he said during a discussion session at the International Petroleum Conference in Abu Dhabi. He added that both producers and consumer countries are satisfied with prices revolve around $ 100 a barrel, OPEC refused prefer to be high or low. The expert had recently expressed confidence that crude oil prices, which are currently a little over $ 80 a barrel, are recovered in mid-2015.

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